Service Points: Picoeconomic Artifacts of an Electronic Services World

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10/28/13

Introduction
The Service Point is the central artifact to define, to realize and to measure within an Electronic Services Economy. Suites of Service Points yield the Business Services that implement the tasks of Business Processes.

Function Point: A Precursor to Service Point
In the 70’s when writing COBOL/CICS applications, we would measure, a priori, the amount of work in a system development based on a notion called “function point.” A function point was either a function call or file interface. There was one platform, several mechanisms and a few environments to deal with. Life was relatively simple as there was not a lot of choice of how to implement our systems and IBM provided great engineering information on how to make the operations more efficient and manageable. This simple circumstance is NOT true in today’s variegated world of Information and Communications Technologies in a growing world of private and public Service Networks. Service Point is a further abstraction of Function Point with other capabilities added. There is the idea of both supply and demand with respect to the functionality provided by a Service Point. It is obvious but worthy of noting that economies are primarily governed by supply and demand. If one is to have an effective artifact to measure economies of business processes that use business services, then aspects of both supply and demand need to be included in the abstraction.

Attributes of Service Points

Figure 1: Relationships of Service Point Attributes © Copyright 2004-13, New Global Enterprises 1 CONFIDENTIAL NOT FOR REDISTRIBUTION

Service Points

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10/28/13

A Service Point supplies: • • • An interface to request the service containing a name and list of parametric variables called the function request signature; A delineation of the data/information needed/provided called the view specification; A semantic specification of constraints, i.e., Policies, on how the functionality is achieved in terms of input state (preconditions), operational state (invariants) and outputs (post conditions)—borrowed from the field of programming by contract— called behavior constraints.

This is the functionality defined by the service point particularly when a formal business vocabulary exists to support the Policies, semantics of the constraints. It defines the computational requirements. A Service Point needs to deliver on the consumer’s requirements for Service in terms of • Service Level Objectives  Operational Times: When is the service required to be enabled and operational  Performance: How does the service need to operate—e.g., transaction per second, user response times, data capacity and transmission rates  Transactional Capability: e.g., Best Efforts, No More Than Once, Once and Only Once, Fire and Forget  Security Level: e.g., Public, Client, Partner, Representative, Agent, Administrator Quality of Service  Availability: requirement for up-time  Reliability: error rates tolerance  Flexibility: time to change and test to meet competitive and evolving demands

Implied in this measure is substantial instrumentation, monitoring and operational data gathering and integration. Development of standards and reformation of firm system architectures are required to measure service points. Both are formidable undertakings. All this said doesn’t mean we should not encourage it to happen. It is essential and necessary for us to really get our arms around the problem of measuring electronic business processes. ICT vendors are beginning to move in the direction of providing technologies and services to provide the capabilities of instrumentation, monitoring and operational data gathering and integration. Now is the time for the ICT buyers to follow suit and buy them. This discussion is an essay to show both buyer and seller where the value is now and going forward.

The Role of Service Points in Electronic Business Processes
From an economic analysis point of view, Service Points are the substrate for implementing an Electronic Business Service. Important in this is the fungibility of different service

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Service Points

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10/28/13

implementations by competing providers to realize the same service points. This is the key characteristic that allows a true free market in Electronic Business Services.

Costing Service Points
While there are qualitative considerations in one firm using business services from another within Electronic Business Processes, employing the regimen suggested here goes a long way in understanding a firm’s quantitative economic incentives to use or provide an Electronic Business Service. On the supply side, the cost structure of the Business Service (a suite of cohering service points) can be measured by the cost to provision all the service points for each activity in a Business Process. The cost for benchmarking purposes should be “at the money” meaning there is no intrinsic discount or premium in the cost. Included also should be the “cost of carry” for the funds needed to do the provisioning. These cost of carry funds should be set at a benchmark rate based on the providing firm and the expected life of the ICT assets needed to do the provisioning. In short, this is the cost structure of the firm specific service utility that provides the Business Service based on the service points.

Finding the Value of Services Points
The difficult part is in assessing the value of the Business Service to the consuming firm. Proposed here is a method that should give a good first approximation of such firm relative value of a service. Very few firms have the same pattern of client usage of a Business Service. Thus, each firm will have a different “loss of business cost” based on outages, b oth in terms of duration and time of occurrence. Second, as errors always occur, either machine or human, the “cost of error correction” is another dimension of determining a first approximation of value that is firm specific as well. Third, the hardest of these three dimensions of determining relative value is assessing market opportunity costs from competitive pressures to change a firm’s business process. Inherent in this is the notion of opportunity cost based on time to market.

Getting Started
An initial approach is to look at sets of business services and the embodied cohesive set of service points that define the Service Network around the larger set of Business Services. Competitive changes occur in two ways: feature enhancements for short-term changes and functional enhancements for longer-term evolution. Delving deeper into this approach is the subject for yet another all-day discussion. The deep-dive day has arrived.

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